Put Your Money to Work

You’ve worked for your money, and retirement is the time to have your money work for you. But what does this mean? Basically, your goal in retirement should be to turn what you’ve saved into retirement income. Many Americans are worried about running out of money since pensions are rare and there are reasons why you can’t rely solely on Social Security in retirement. But if you’ve saved a substantial nest egg of 1 million dollars, you can use these strategies to help make your savings last and put your money to work.

The 4% (or 3%) Rule

You may have heard of the 4% rule, which says that you can safely withdraw 4% from your nest egg per year without running out of money in retirement. This general piece of advice isn’t perfect for every retiree, and some experts advise withdrawing 3% of a nest egg’s value per year instead of 4%. The idea is that by limiting withdrawals, you can maintain a withdrawal rate for a longer period of time by allowing your nest egg to continue growing.

Create Income Buckets

If you need to withdraw more than 3% from your nest egg each year, consider a bucket strategy: If you withdraw 4.2% per year from a million-dollar nest egg to get $3,500 each month, it could potentially be better to not withdraw it all from one place. Instead, you can create three “buckets.” One would be a short-term, lowest risk investment bucket with enough cash assets to cover five years of withdrawals. The second would be the intermediate-terms bucket with income-producing assets like real estate, stocks, and annuities. You can replenish your short-term bucket with funds from the intermediate bucket. The third bucket will be for long-term investments. When the market is good, income from this bucket can replenish the first two buckets, and in bad years you can avoid dipping into it by withdrawing from the first two buckets instead. This could potentially work for retirees with certain asset allocations, but you should consult an advisor before making any decisions.

Which retirement income strategy is best for you depends on your unique financial situation and retirement goals. A professional here at Peak Financial Freedom Group can help you create a plan that fits your needs. Transitioning from contributing to retirement accounts and accumulating wealth to withdrawing is significant, which is why we offer complimentary financial reviews. Sign up to take the first step towards creating a retirement income plan.

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DISCLOSURE: All presentation data is provided and intended to be used for general educational purposes only and is not intended as a solicitation for you to buy or sell any financial product. None of the material in this presentation is intended to give you, nor are the presenters engaged in giving you, specific tax, investment, real estate, legal, estate, retirement, or financial advice, but rather to serve as an educational platform to deliver information; nor is it intended to show you how the strategies presented can specifically apply to your own tax, investment, estate, financial, or retirement position, but rather to offer an idea of how these principles generally may apply.

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